THE soon-to-be-introduced higher cash denominations by the Reserve Bank of Zimbabwe (RBZ) is too little too late and will be of no effect unless the local currency is stabilised, analysts have said.
The central bank announced it will introduce higher denominations of ZW$10 and ZW$20 totalling ZW$600 million within the next few weeks.The transacting public is struggling to access cash and is forced to buy the local currency at punitive premiums of as high as 50%.Currently, around ZW$1,4 billion in cash is circulating. The new notes will take the total to ZW$2 billion.
For economic analyst Godfrey Kanyenze the introduction of higher denominations is a case of too little too late.“They are just simply reacting. In normal economies they have currency denominations of 100 and 200. Introducing denominations of just 10 and 20 is a case of too little too late. We are shooting at a moving target,” Kanyenze pointed out.
“The real issue here is to rein in quasi-fiscal activities by the central bank. We are in a rapidly re-dollarising economy but implementing measures using the Zimbabwe dollar. It is like somebody using a rope to try hold back a boulder that is hurtling down the precipice.”
Without stabilising the local currency, the central bank’s increase in denominations is an exercise in futility, Kanyenze said. He noted that the country seems to be moving back to the 2008 era when the central bank wantonly printed the local currency, stoking hyperinflation.
Business consultant Simon Kayereka doubts that the increased denominations will benefit the ordinary man in the street.“The RBZ strategy is very reactive. They have been watching cash shortages for several years, while people struggled with cash shortages. Now they want to appear like angels providing a long-awaited solution. It’s almost as if they are creating a deliberate desperate situation for depositors and then want to appear like the good guys. This is too little too late,” Kayereka noted.
“The crux of the matter is also about distribution. One can almost anticipate that this money is meant for money changers in the street where poor people will go and buy cash. How does money that is limited end up with these people? If the RBZ wants to be taken seriously, then they must address this anomaly otherwise it is going to be cash shortages as usual.”
Economist Prosper Chitambara said the proposed higher denominations could further stoke inflation, which has galloped to 676,39%, year-on-year, as of March.
“I think it will stoke inflation if it is new money coming in and not replacing that in circulation,” Chitambara said.
“There is obviously a dilemma between being mindful of the need to limit money supply and meeting the demand for higher notes in the market. We are likely to see a situation where we will be chasing our tail in this inflationary environment.”